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“Good Deed” or Producer Licensing Violation?

Even experienced agents can make mistakes that jeopardize their license

Ben Adams knows what he’s doing as an independent insurance agent.[1] He should. He’s been licensed for nearly 40 years, selling P & C and Life & Annuity products from the “Main St.” family-owned insurance agency his dad founded in a small town in eastern Pennsylvania. Ben and his brother have successfully operated the agency since dad retired years ago. They are well-respected in their community and in the industry. They have a nice, profitable book with good retention and respectable loss ratios. Naturally, Ben never had any licensing violations or trouble with regulators. And in his way of thinking, if a customer is unhappy, he will make it right. That’s the way their dad did business, so going above and beyond in customer service comes naturally to the Adams brothers. This time, though, that’s the thinking that ended up getting Ben in trouble.

Ben didn’t know it at first, but a long-time customer named Joe Miller was unhappy. The company that insured Miller’s small commercial property for several years changed its underwriting appetite and would be non-renewing the policy. Ben had several customers in the same predicament and had found a competitive alternative to write the coverage for all of them. As Miller’s renewal date approached, Ben double-checked the new company’s underwriting guidelines, prepared an application, met with Miller to sign it, submitted it and bound coverage to pick up at the renewal date. He knew the underwriter well-enough to know that if there were any questions, he would hear about them, but there were none. The company would issue the policy and bill the customer; there was nothing left for Ben to do.

But, about three months later, Ben was surprised by a letter from the Insurance Department. Miller filed a complaint against him and the Department required Ben’s response! Ben was floored. What had he done? It turns out, the new company was slow to issue the policy and Miller wondered if he had coverage. Instead of calling Ben, he bought coverage elsewhere. When Miller got the bill for the policy Ben had sold him, he tossed it in the trash. When the company sent it to collection, Miller filed a complaint with the Insurance Department saying Ben didn’t find him coverage and now he was being billed for a policy he didn’t need!

In reality, Miller did need the policy Ben sold him. Without it, there would have been a lapse, so the company was owed about $1,000 for several weeks of coverage. Ben sent his written response to the Department, explaining the situation. Furthermore, the bill was no longer an issue –  Ben had paid it – so Miller’s complaint was moot. Ben knew he hadn’t done anything wrong, but still felt bad about the mix-up, wishing he had tracked the issuance of the policy closer. Taking care of the premium was the right thing to do, and would take care of having to deal with the complaint. “End of story,” he thought.

About six months later, Ben was surprised by another letter from the Department. This one stated: “The Enforcement Division has placed you under investigation for alleged violations of the Pennsylvania insurance laws” prohibiting rebates, and “for demonstrating a lack of general fitness, competence or reliability sufficient to satisfy the Department that the licensee is worthy of licensure.” What!?

What Ben thought was good customer service by resolving the complaint and paying the premium, was an inadvertent violation of the law prohibiting an agent from paying or refunding any portion of a premium. Now, Ben had an even bigger problem. Could he really lose his license? His career? The Department was accusing him of not being “worthy.” “Holy smokes,” he thought.

After Ben called the IA&B, he hired me to represent him. We eventually helped the Department recognize that even though Ben may have technically violated the anti-rebating statute, his intentions were pure and it was an honest mistake by a good agent. We ultimately negotiated an outcome that didn’t create a blemish on his record and he didn’t have to pay a fine or penalty. He was spared the embarrassment of a formal, public, licensing action.

Ben learned some tough lessons through this experience. His story is a good reminder that no matter how long you’ve been in the business, it’s never too late to learn and to stay up-to-date with the laws and regulations governing your conduct as a licensee. An agent should never refund or pay any portion of a premium without good legal advice, no matter how pure the intentions. “Once bitten, twice shy,” Ben told me.

The author is an insurance regulatory attorney in private practice and former legal counsel to the Pennsylvania Insurance Department. He can be reached at: or 717-236-1300.

Note: This article originally appeared in the May 2018 issue of “Primary Agent.”

[1] This is a true story; however, names have been changed.

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